Earnings Call Transcript - CCC Q3 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to the CCC Intelligent Solutions Third Quarter Fiscal 2025 Conference Call. Please be advised that today's call is being recorded. I would now like to hand the conference over to your first speaker today, Bill Warmington, Vice President of Investor Relations. Please go ahead.

William Warmington, Vice President of Investor Relations

Thank you, operator. Good morning, and thank you all for joining us today to review CCC's Third Quarter 2025 Financial Results, which we announced in the press release issued earlier this morning. Joining me on the call are Githesh Ramamurthy, CCC's Chairman and CEO; and Brian Herb, CCC's CFO. The forward-looking statements we make today about the company's results and plans are subject to risks and uncertainties that may cause the actual results and the implementation of the company's plans to vary materially. These risks are discussed in the earnings releases available on our Investor Relations website and under the heading Risk Factors in our 2024 annual report on Form 10-K filed with the SEC. Further, these comments and the Q&A that follows are copyrighted today by CCC Intelligent Solutions Holdings, Inc. Any recording, retransmission or reproduction or other use of the same for profit or otherwise without prior consent of CCC is prohibited and a violation of United States copyright and other laws. Additionally, while we will provide a transcript of portions of this call, and we have approved the publishing of a transcript of this call by a third party, we take no responsibility for inaccuracies that may appear in the transcripts. Please note that the discussion on today's call includes certain non-GAAP financial measures as defined by the SEC. The company believes that these non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends relating to the company's financial condition and the results of operations. A reconciliation of GAAP to non-GAAP measures is available in our earnings release that is available on our Investor Relations website. Thank you. I'll now turn the call over to Githesh.

Githesh Ramamurthy, Chairman and CEO

Thank you, Bill, and thanks to all of you for joining us today. I'm pleased to report that CCC delivered another quarter of strong top and bottom line results. In the third quarter of 2025, total revenue was $267 million, up 12% year-over-year and ahead of our guidance range. Adjusted EBITDA was $110 million, also ahead of our guidance range, and our adjusted EBITDA margin was 41%. These results underscore the strength of our platform and the scalability of our model and the growing demand for AI-driven innovation across the insurance economy. On today's call, I'll focus on two key themes that define our Q3 performance and outlook. First, adoption continued to improve across our platform, particularly among our largest and most sophisticated customers. This momentum builds on the strong trends we observed in Q2 and reflects customers' growing confidence in CCC's ability to help deliver measurable ROI and operational efficiency at scale. Second, we are proactively investing in our organization to harness this momentum to accelerate value creation across the insurance claim and repair ecosystem, enhancing our go-to-market capabilities, deepening client and partner relationships and strengthening our multisided network. We believe these investments position CCC for continued durable long-term growth. Let's start with the first theme, the accelerating adoption of CCC's platform across our customer base. In Q3, we saw momentum across our customer base with multiple renewals, relationship expansions and new business wins. These results reflect the value our solutions deliver and the trust our clients place in CCC. A recurring theme in CCC's four decades is the evolution of individual solutions into a connected platform. The most recent evolution is with our AI-based solutions, which are following a similar trajectory as previous growth cycles. Starting with the launch of Estimate-STP in late 2021, we've expanded vision AI use cases to create a powerful AI layer that enhances our core software with advanced capabilities in routing, estimating and workflow. These capabilities are seamlessly connected through our event-based overlay, IX Cloud, which links more than 35,000 businesses across the CCC network. When multiple solutions are used together, it creates a compounding effect, reducing cycle time across the ecosystem and improving outcomes for insurers, repairers and consumers alike. We continue to see good engagement from our auto physical damage or APD insurance clients in Q3 with multiple renewals and contract expansions. For example, a top 20 insurer signed on for Intelligent Reinspection, our workflow AI solution, demonstrating the growing demand for intelligent automation across the claim life cycle. Adoption of these solutions continues to scale, driven by their proven ability to deliver meaningful ROI and operational efficiency. As I have said before, our largest and most sophisticated customers put new technologies, including our solutions, through rigorous testing and piloting before full adoption. Our customers consider these processes to be essential to validate their specific ROI, to identify internal process improvements and to align stakeholders across their organization. We're now seeing evidence that working with our customers through these diligence processes contributes to increased adoption of our solutions. Over the past year, a top 10 insurer has increased the number of AI-based solutions in use and the volume of claims being affected by those different AI use cases. As a result, this customer increased the number of claims leveraging at least one CCC AI model from roughly 15% of their claims to about 40%. This is a clear example of CCC turning innovation into operational impact, delivering measurable gains across the claims journey. Following the progress in APD, let's turn to casualty, an exciting growth area where our investments in technology, talent and product innovation are paying increasing dividends. For example, Liberty Mutual, the sixth largest auto insurer in the United States by 2024 direct premium written has signed with CCC and is actively transitioning a substantial portion of their casualty business to our platform. This decision was based on the strength of CCC's platform capabilities, the breadth of our extended ecosystem and our ability to deliver operating performance through ease of use, actionable analytics and continuous innovation, including AI. This transition has just started and will not be at full run rate until mid-2026. In addition to the Liberty Mutual contract, we had multiple renewals and contract expansions across our casualty client base, including a top 5 insurer for both first and third-party claims. Growth in our casualty business is outpacing overall company growth and represents one of CCC's most compelling long-term opportunities, which we believe may reach or even exceed the scale of our auto physical damage insurance business over time. Part of our confidence in the casualty opportunity comes from the fact that its total addressable market is similar in scale to APD, but its customer count is currently just one-fifth that of APD and contributes approximately 10% of our revenue. Medical inflation and complexity are also increasing rapidly with our insurance customers increasingly focused on addressing this area of claims. We're also advancing tools to help our insurers manage injury claims, an area where EvolutionIQ is already delivering results. EvolutionIQ saw good momentum in Q3, renewing and expanding contracts with multiple top 15 disability carriers, launching Medhub for auto casualty and adding its first workers' compensation cross-sell into an existing CCC customer. A central pillar of our investment thesis in EvolutionIQ was the integration of its AI-powered injury claims resolution capabilities into CCC's auto casualty suite. This strategic alignment positions us to accelerate our momentum in casualty and unlock new cross-sell opportunities across our APD client base of over 300 insurers. The first milestone in this integration journey was Medhub, EvolutionIQ's AI-powered medical record synthesis solution becoming generally available for auto casualty in Q3. Medhub's ability to decode complex medical documentation and surface actionable insights is generating strong interest from multiple top 10 insurers. In the past 12 months, Medhub has processed 6 million documents, 5.5 million full summaries and 82 million pages. Another strategic rationale for our acquisition of EvolutionIQ was the opportunity to deploy EvolutionIQ solutions, particularly its emerging workers' compensation product line into CCC's existing insurance client base. With seven of the top 10 workers' comp P&C insurers already CCC clients, we are excited to announce that in Q3, a top 25 CCC APD and casualty client became a new customer for EvolutionIQ's workers' comp solution. Together, CCC and EvolutionIQ are enabling insurers to harness AI more broadly, driving meaningful improvements in operational efficiency, customer experience and claim outcomes. Over time, we plan to scale these capabilities across our client base, unlocking new pathways for growth and long-term value creation. This integration is a natural extension of our platform strategy, uniting data, AI and workflow automation to address complex challenges in injury claims resolution. While insurers are scaling adoption of our AI solutions, repair facilities are also embracing innovation to meet the challenges of increasingly complex vehicles and higher consumer expectations. As vehicles become more advanced and customers demand faster, more accurate and more transparent service, repair facilities face growing pressure to deliver. CCC's platform is designed to help repairers thrive in today's demanding environment. This quarter, we saw continued momentum of repair facilities adopting our latest solutions. For example, Build Sheets, our accuracy-enhancing part selection tool, has now been adopted by over 5,500 repair facilities, up from about 5,000 last quarter. Usage of our photo AI-powered estimating tool, Mobile Jumpstart, is also accelerating. In September, we surpassed an annualized run rate of over 1 million AI-based repair estimates generated using Mobile Jumpstart. Jumpstart enables repairs to cut estimate preparation time from 30 minutes to under 2, freeing up technicians and accelerating cycle times. With tools like JumpStart and Build Sheets, CCC is helping define what modern, efficient and consumer-centric repair looks like. We believe our AI-driven tools and the connectivity of our network are driving a widening gap in operating efficiency and consumer experience between repair facilities on the CCC platform and those that are not, a gap that we anticipate will continue to expand as adoption and expectations rise. Let's take CCC's routing AI solution, First Look, as an example. It helps insurers only route vehicles to a repair facility if they're truly repairable, preventing shops from losing valuable time and space on vehicles that will ultimately be declared total losses. Our workflow AI solution, Intelligent Reinspection, is another example. It reviews supplement requests, which now occur in about two-thirds of repair claims. With CCC's new solution, roughly 40% of those supplement requests are auto approved, significantly shortening cycle time for repairs. We will continue to introduce new solutions that combine the connectivity of our multisided network and the power of AI to deliver even greater efficiency and consumer experience gains for our customers. As a result, we expect the productivity and service gap between those on the CCC network and those who are not to expand over time. This brings me to the second theme of today's call, the organizational investments we are making to accelerate value creation across the insurance claim and repair ecosystem. In addition to getting to know many of our team members during his first six months at CCC, our new President, Tim Welsh and I have met with dozens of clients. These conversations were invaluable and had three takeaways. The first is that our insurance customers are increasingly focused on the affordability of their products. A recent Guardian service study found that 1 in 4 Americans have downgraded or dropped insurance to free up cash and 1 in 3 would temporarily go without coverage to afford basic necessities. This underscores a critical question our clients are asking: how can CCC help improve operational cost efficiency to make insurance more affordable for consumers? The second takeaway is that our clients are intent on leveraging the opportunities presented by the current wave of technology-driven transformation. AI creates new possibilities for handling claims and new opportunities for participants in the CCC ecosystem to collaborate. Insurers, repair facilities, OEMs and other participants in the ecosystem are looking to us for strategic guidance on how to leverage AI to streamline workflows and navigate the organizational change required to implement these innovations. They are not looking for incremental gains. They want a step change, and they want CCC to help them achieve it. The third takeaway is that our clients want us to do more with them. Over time, we've built long-term relationships by supporting their mission-critical processes and consistently delivering platform-driven innovation. As a result, our role has evolved into a trusted adviser and innovation partner. Clients are asking us to provide solutions that integrate more deeply across their operations and ecosystems as well as work closely with them to help shape the future of insurance. These client conversations reaffirm the strength of our product investments and highlight CCC's growing role as a transformation partner of choice. Combined with strong adoption momentum we're seeing across our platform, this gives us the confidence to invest behind the demand, positioning CCC to capitalize on what we believe is a transformative era of growth and innovation. One of the key investments we're making is a refinement of our go-to-market strategy to better engage customers around the broader value of the CCC platform. As we shared on our February call, early changes included simplifying our solution packaging by combining insurance offerings into more holistic outcome-driven bundles, enhancing change management support to accelerate adoption of newer innovations and consolidating all market-facing and service functions under Tim Welsh's leadership to drive alignment and accountability. The next phase of this evolution involves augmenting our teams with new skill sets, bringing in talent that can help us build broader, deeper and more strategic relationships across key clients. One way that we are doing this is augmenting our existing teams with new client leaders that have proven expertise in deep strategic consultative platform sales, which will allow us to engage higher and more broadly across the organization. We are funding these investments by reallocating existing spend to these higher ROI opportunities. These moves reflect our confidence in our long-term growth potential and are guided by what our clients need most. As part of our broader effort to align the organization for scale, we have also separated the previously combined roles of Chief Product Officer and Chief Technology Officer and are actively recruiting to fill both positions. This structural change enables greater focus and specialization across both functions, which we believe will drive stronger execution, enhance client satisfaction and elevate the consumer experience. In parallel, we are continuing to invest in our multisided network, adding new capabilities, expanding participation and integrating advanced AI features that enhance our ability to deliver differentiated value at scale. With over 200 partner organizations, we see significant opportunity to deepen existing relationships and forge new ones, further strengthening the CCC ecosystem. Taken together, these investments reflect our commitment to scaling CCC's impact by aligning our organization more closely with client needs, deepening strategic relationships and strengthening the ecosystem that powers our platform. We are confident that these steps position us to lead in a rapidly evolving market and deliver meaningful durable value for our customers, partners and shareholders. Every day, CCC's solutions help our customers support over 50,000 people affected by vehicle accidents and over 10,000 impacted by workplace injuries, helping them get their lives back on track as quickly as possible. Since going public in 2021, we've doubled the annual dollar value of claims processed in our system from slightly over $100 billion to over $200 billion. For this, we are truly grateful to the growing trust and reliance from our customers across the insurance economy. We saw clear traction in Q3, particularly among some of our largest and most sophisticated customers. Their adoption trends reinforce our confidence in the structural changes we're making to scale our impact and deliver against a compelling long-term growth opportunity. As the insurance economy continues its digital transformation, CCC remains deeply committed to providing our customers with solutions to shape a future where innovation drives better outcomes for businesses, consumers and communities. We are excited about the road ahead and confident in our ability to deliver strong results and lasting value. I will now turn the call over to Brian, who will walk you through our results in more detail.

Brian Herb, CFO

Thanks, Githesh. As Githesh highlighted, Q3 was a strong quarter with meaningful new business wins, renewals, contract expansions and a continuation of the adoption momentum we saw in Q2. These results reflected the continued execution of our platform strategy and the strategic investments we're making to support long-term growth. Now let's turn to the numbers. I will review our third quarter 2025 results and then provide guidance for the fourth quarter and the full year of 2025. Total revenue in the third quarter was $267 million, which is up 12% from the prior year period. In the third quarter of 2025, approximately 5 points of growth was driven by cross-sell, upsell and adoption of our solutions across our client base, including repair shop upgrades, the continued adoption of our emerging solutions and casualty. Approximately 3 points of growth came from our new logos, mostly repair facilities and parts suppliers and about 4 points of growth came from EvolutionIQ. In the quarter, contribution from our emerging solution expanded to just over 2 points of growth, mainly driven by our AI-based APD solutions, subrogation, diagnostics and Build Sheets. Emerging solutions represent about 4 percentage points of our total revenue in Q3 of 2025, and these solutions continue to be the fastest-growing portion of our portfolio. Industry claim volumes in Q3 declined 6% year-over-year. That compares to 9% decline in Q1 and an 8% decline in Q2. The trend continues to represent approximately a 1 percentage point headwind to growth, consistent with the impact we experienced in the first half of the year. Turning to our key metrics of software gross dollar retention or GDR and software net dollar retention or NDR, please note that both of these metrics now include EvolutionIQ, and we're using an annualized software revenue on a combined basis for the prior year to provide a baseline for annualized revenue growth. GDR captures the amount of revenue retained from our client base compared to the prior year period. In Q3 2025, our gross dollar retention was 99%, which is in line with the last couple of years. We believe that GDR reflects the value we provide and the significant benefits that accrue to our clients from participating in the broader CCC network; our strong GDR is a core tenet to our predictable and resilient revenue model. Net dollar retention captures the amount of cross-sell and upsell from our existing clients compared to the prior year period as well as volume movements in our auto physical damage client base. In Q3 2025, our NDR was 105%, which is down from 107% in Q2 2025, primarily due to timing of deals. Now I'd like to turn to the income statement in more detail. As a reminder, unless otherwise noted, all metrics are non-GAAP. We provide a reconciliation of GAAP to non-GAAP metrics in our press release. Adjusted gross profit in the quarter was $199 million. Adjusted gross profit margin was 75%, which is down from 78% last quarter and against Q3 of 2024. The lower adjusted gross profit margin is mostly driven by higher depreciation from newly launched solutions and software enhancements. Other impacts include a one-time impact of the write-off of a discontinued solution and revenue mix. Overall, we feel good about the leverage and scalability of the business and making progress towards our long-term target of 80% over time, but this percent can move around quarter-to-quarter. In terms of expenses, adjusted operating expense in Q3 2025 was $106 million, which is up 12% year-over-year, including the acquisition of EvolutionIQ. Excluding EvolutionIQ, adjusted operating expense increased 3% year-over-year, primarily driven by higher resource-related expenses and professional fees. Adjusted EBITDA for the quarter was $110 million, up 8% year-over-year with an adjusted EBITDA margin of 41%, this was above the high end of the range, which was $104 million to $107 million, reflecting the revenue that flowed through in the quarter and some phasing of costs that have moved into the fourth quarter. Stock-based compensation as a percent of revenue declined to 15% in Q3. That's down from 24% of revenue in Q1 and 18% of revenue in Q2. We expect stock-based compensation as a percent of revenue to continue to trend down in Q4, and in 2026 to reach high single digits in 2027. That's subject to further business needs and market conditions. Now let's turn to the balance sheet and cash flow. We ended the quarter with $97 million in cash and cash equivalents and $993 million of debt. At the end of the quarter, our net leverage was 2.1x adjusted EBITDA. We continue to show improving trends in free cash flow generation. Free cash flow in Q3 was strong at $79 million. That compares to $49 million in the prior year period. This reflects strong collections and favorable timing on working capital. Free cash flow on a trailing 12-month basis was $255 million, which is up 28% year-over-year. Our trailing 12-month free cash flow margin as of Q3 2025 was 25%. That's up from 22% in Q3 of '24. We have used our strong free cash flow performance to return capital to shareholders through share repurchases. In Q3, we completed open market repurchases of 4.8 million shares of CCC common stock for about $45 million. We continue to be active buyers in October, bringing the total year-to-date repurchase to approximately 30 million shares for approximately $280 million under our previously announced $300 million share repurchase program. I'll now turn to guidance. Beginning with Q4 2025, we expect revenue of $272 million to $277 million, which represents a 10% to 12% growth year-over-year. We expect adjusted EBITDA of $106 million to $111 million, a 40% adjusted EBITDA margin at the midpoint. For the full year 2025, we are raising the low end of our guidance range and maintaining the upper end for both revenue and adjusted EBITDA. We are now expecting revenue of $1.051 billion to $1.056 billion, which is a 12% year-over-year growth at both the midpoint and the high end of the range. For adjusted EBITDA, we're now expecting between $423 million to $428 million, a 40% adjusted EBITDA margin at the midpoint and a 41% margin at the high end of the range. This includes a moderate EBITDA loss from EvolutionIQ. Excluding EvolutionIQ, our guidance implies about 100 basis points of year-over-year margin expansion at the midpoint. So a couple of things to keep in mind as you think about our Q4 and full year guide. First, our Q4 revenue forecast for the core remains in line with our previous guidance. We are raising the low end of our full year revenue guidance range to reflect strong performance in Q3 and maintaining the upper end of the range because of a slightly softer contribution from EvolutionIQ. Overall, the pace and scale of new business wins, renewals, contract expansion across the core business and EvolutionIQ reinforces our confidence in our long-term growth as we head into 2026. Second, we are raising the low end of our full year adjusted EBITDA guidance to reflect Q3 outperformance while keeping the upper end unchanged as we expect to absorb Q4 cost tied to the organizational investments Githesh outlined, which include some onetime consulting recruiting fees as well as exit and onboarding costs. As a result, we do not expect these investments to impact margins going forward, and we remain on track to resume margin progression in 2026. So as we wrap up, I'd like to reiterate our confidence in the strength of our business and our ability to deliver against our long-term strategic priorities. Our Q3 results and positive momentum underscore our commitment to support our clients as they advance their digital transformation. We're encouraged by the growth of emerging solutions and the disciplined execution that is driving margin expansion and strong free cash flow. As we look ahead, we believe our durable business model, expanding portfolio of AI-enabled solutions and strategic investments, including continued investments in our core platforms and the teams that support them position us well to create long-term value for both our customers and our shareholders.

Operator, Operator

Thank you. Our first question today comes from Kirk Materne with Evercore ISI.

S. Kirk Materne, Analyst

Congratulations on a strong quarter. Githesh, one thing that caught my attention was the customer you mentioned who increased their AI utilization from 15% to 40%. Can you elaborate on what this means for monetization for your company? Specifically, how does this customer’s contribution to revenue on an annual contract value basis scale as your AI solutions become more integrated? Additionally, Brian, could you provide some clarification on EvolutionIQ? I recall it being a 4% contribution, while you were aiming for 5%. Can you provide more details about that?

Githesh Ramamurthy, Chairman and CEO

Thanks, Kirk. The main theme here is that as we've expanded our vision AI we have expanded the use cases across a broader spectrum of the claims. So as the quality, the caliber of the vision AI to help guide and make decisions all the way from the consumer at the front end, helping decide whether the car should be repaired, totaled, using it for Estimate-STP, using it for Intelligent Reinspection. So there's a lot of different places in the workflow that the solution is now being applied in addition to subrogation. In terms of the specifics, in terms of the impact on financial, I'll let Brian pick that up. But we're super excited about the uptake and how we've been able to expand that core AI vision capability across many other facets of the claim.

Brian Herb, CFO

Yes. If you consider AI's role in claims, there is an additional opportunity or premium we can leverage. For our APD client base, when they utilize our core solutions, particularly for estimating valuation workflows, and then implement our AI features on top of those solutions, such as Estimate-STP or our reinspection workflow, the potential increase in revenue for a fully integrated client could be around 50% within the APD solution set. This illustrates the size of AI's impact on our clients. Regarding your second question about EvolutionIQ, we did observe a 4-point contribution during the quarter, which is expected to slightly increase in Q4, contributing approximately 5% to overall growth in that quarter. The minor delays we encountered in Q4 are primarily due to the timing of client deployments and when they go live. While these clients are signed on, the timing issues have postponed the revenue realization. It's not a matter of revenue loss; it's simply a timing issue related to revenue recognition.

Operator, Operator

Our next question comes from Gabriela Borges with Goldman Sachs.

Gabriela Borges, Analyst

Brian, I want to understand your growth outlook for next year in light of the changes you're implementing. Based on this year's commentary, it seems that some factors beyond your control have resulted in you being in the lower end of your revenue target, which is 7% to 10%. Can you explain what scenarios might help us get closer to the higher end of that target for next year? Additionally, why are you making these changes now, and do you believe they could help you achieve a higher revenue growth rate for next year?

Githesh Ramamurthy, Chairman and CEO

Thank you, Gabriela. I'll address the latter part of your question first. Reflecting on the past 20-plus years, our primary focus has always been on developing high-quality solutions for the next generation. This was evident during the rise of the Internet, the advent of mobile technology, and as we introduced new solutions. Over the last four to five years, we've made significant investments in AI solutions, which are now beginning to scale. We discussed this in our Q2 and Q3 reports, and we've noticed that as we deploy these solutions and clients begin to adopt them, they express a desire for a substantial transformation rather than just incremental improvements. This indicates a need for us to assist them further since it involves changes to their processes and management. This need is a key driver behind our current changes: Tim has had valuable opportunities to engage with the business, and we've received feedback indicating that clients expect us to expand our range of solutions. Consequently, we must engage at higher organizational levels, as this impacts many other facets of their operations. Thus, our approach is to enhance and build upon our core capabilities rather than implement drastic changes. I hope that clarifies that part of your question.

Gabriela Borges, Analyst

Yes, absolutely.

Githesh Ramamurthy, Chairman and CEO

The answer to your question about growth rate is that the drop in claim frequency is starting to moderate. However, what really drives our growth is the adoption of our emerging solutions. We are continuing to build on our core insurance while adopting these new solutions. As you've seen, there are two key dimensions to this adoption. First, clients are expanding their use of solutions like Estimate-STP and Intelligent Reinspection. Second, our more sophisticated customers are deploying these solutions and we are seeing increased adoption. The casualty sector presents a significant opportunity, and we believe that as larger customers come on board, it will help drive growth. Regarding EIQ, as we transition from 2025 to 2026, our core disability solution continues to perform well. Notably, one of our traditional CCC clients is using the workers' comp solution, which represents a new product we can offer to existing customers. On a macro level, we are anticipating growth driven by this series of new solutions.

Operator, Operator

Our next question is from Dylan Becker with William Blair.

Dylan Becker, Analyst

Appreciate it. Maybe, Githesh, starting with you on casualty, talking about it kind of continuing to grow faster than the aggregate business here. I'm wondering how much of the emphasis that you're seeing from customers on the casualty side is driven by like the market factors around inflation and the need for kind of tech modernization and data there versus or maybe pairing that with the maturation of your platform and the differentiation of being able to kind of pair all of the APD data that you have there. It feels like it's kind of a combination of both, but wonder if maybe one is helping accelerate the other, they're kind of working in tandem together, how you guys maybe think about it.

Githesh Ramamurthy, Chairman and CEO

Thanks, Dylan. The way we think about it is really at 2 levels. So first and foremost, when you think about it at a macro level, medical inflation is really running very aggressively out of control. And there's a whole host of things happening with our clients when it comes to the medical, what's happening with medical inflation and its impact on the affordability of insurance for consumers. So that's one macro fundamental thing that's changing. Second, and perhaps as important is that the investments we have made in our casualty platform over the last several years, similar to what we've been able to do on the auto physical damage side, where we have given customers tools, technologies and capabilities to be able to manage this, the maturity enhancements and honestly, some of the very uniquely differentiated features we have in casualty are also helping with adoption.

Dylan Becker, Analyst

Perfect. Okay. Great. And then maybe another way of kind of asking for Brian here, too. If we net out the EIQ contribution piece, it looks like the core accelerated again here kind of closer to 8%. It's a function, it seems like of emerging stepping up as well, but you still maybe have the call option of claims volume normalization. I guess, is that first a fair characterization? And as you start to see more of these kind of like large customer multiproduct components and maybe some stuff that's already signed layering in next year, can you give us a sense of kind of the conviction of kind of that steady-state model here playing out as you guys had kind of laid it out or see it taking place, if that makes sense?

Brian Herb, CFO

Yes, it makes sense. Thanks, Dylan. Yes, so you're right. I mean the last 2 quarters, if you pull out EvolutionIQ in both Q2 and Q3, we're doing about 8% in the core on an organic basis. And in that, as you alluded to, we're seeing about 1 point of headwind drag on claim volume. So that's running through the numbers as well. When you think about what we talked about last quarter on Q2 call and then the call today regarding some of the client wins, the expansion, the new casualty win, the adoption of emerging solutions, it certainly gives us confidence as we exit the year and the momentum in the business. So we're feeling good on the exit run rate coming out of the year and setting us up for 2026. That said, each year, we need to grow about $100 million of revenue. So although it gives us good momentum and feeling confident about delivering against the position, there's still more to do next year. But overall, there's a lot of positive momentum in the business.

Operator, Operator

Our next one comes from Josh Baer with Morgan Stanley.

Josh Baer, Analyst

First, on the contribution from new logos, it seems to be tracking slightly better than some of the frameworks that you've laid out. Just hoping you could dig in a little bit there and talk about types of customers you're landing, the size of those lands. Any other context on new logo contribution?

Brian Herb, CFO

Yes, I can take that. Hi, Josh. So yes, we're really happy and pleased with the new logo performance. We've been seeing about 3 points of growth from new logos over the past couple of years, and that's been very consistent. As you alluded to, over time, we do expect that to moderate. And in our long-term framework, we expect that to be more like 2 points of growth just because of the market leadership position we have both on the carrier side of the business and the shop side of the business. But we're really happy with the performance that we've been seeing. It remains to be distributed. It's a combination of repair facilities, part suppliers, and we are still bringing in new carriers. We talked about a carrier win earlier in the year that's contributing to the new logo as well. So yes, we're pleased with the performance and feeling good on how that's playing through.

Josh Baer, Analyst

Got it. And a follow-up on the claims headwind. I assume it's just rounding. I did want to check. Did the headwind get smaller following the lighter declines in claims? Or is there anything else going on there? And then if you could talk about any of the monthly trends from July through October.

Brian Herb, CFO

Yes. I mean we're seeing -- I'll let Githesh reference the second part. But as far as the drag that we're seeing in growth, I mean, claims were down 9% in Q1. They were down 8% in Q2, and we saw about 1 point of headwind in the first half. In Q3, it's down 6%. We're still seeing roughly 1 point. There is some rounding in that. I'd also say and we've talked about this in the past that the claim decline isn't perfectly correlated with our revenue model. So it just doesn't work out mathematically -- it perfectly correlated. It matters on client mix, product mix and also timing of true-ups and whatnot. So there's kind of a lot of factors that play into it. I think you can say there's a slight benefit in rounding, but it's pretty marginal. And we're still facing kind of the 1% headwind. We're assuming that as we go into Q4 as well. Within the guide position, we are assuming a 1 point drag in Q4 as well. I don't know, Githesh, if there's anything you want to...

Githesh Ramamurthy, Chairman and CEO

No, I think this is also related to two macro factors I want to highlight. One is the significant moderation of claim inflation, which we expect to see in 2025. Our data shows that claim inflation has decreased, as reflected in our reports and crash course. The second factor we're observing is that there are more requests for rate decreases from carriers than for rate increases. Therefore, from a consumer and affordability perspective, these two macro factors are starting to have an impact. Additionally, we still notice that the number of consumer self-paid claims remains significantly higher compared to two or three years ago.

Operator, Operator

Our next question is from Saket Kalia with Barclays.

Saket Kalia, Analyst

You have nice quarter.

Githesh Ramamurthy, Chairman and CEO

Thanks, Saket.

Brian Herb, CFO

Hi, Saket.

Saket Kalia, Analyst

Yes, sure. Githesh, great to see the Liberty Mutual win on the casualty side and just generally momentum build in that business. You talked about how the TAM there is similar in size to APD. I was curious though, maybe on the market share side, right? What does the market share look like in the casualty business? And specifically, how much of that market is maybe done manually or through homegrown solutions versus maybe incumbent software vendors that you would have to displace? Even anecdotally, kind of how you think about that?

Githesh Ramamurthy, Chairman and CEO

Yes. So I would say at a very high level, I'd say the majority of claims processed today, even on the casualty side, are using some kind of software. So over the last couple of decades, that's the vast majority. I wouldn't put any specific percentage other than the vast majority. But there are still pockets where many elements are still done manually, and we're seeing that with a few customer adoptions. But for the most part, it's done using existing providers. You know...

Saket Kalia, Analyst

Got it. That's helpful.

Brian Herb, CFO

Yes. So we've talked about it in the past, and you see it run through the numbers. I mean, NDR will just move around quarter-to-quarter. It really has dependency on deal flow phasing, timing of deals that come home in the quarter, the deals you're lapping from the prior year. So there's just a dynamic of the deals that are playing through. The second part is product mix matters as well. So as you know, casualty solutions and our part solutions do not go into our NDR calculation, but they are in total growth. And casualty was very strong in the quarter, so it contributed to total growth, but that's not running through the NDR. So that's a factor as well. And then third, I'd highlight that EIQ was softer in the quarter in this quarter Q3 than it was in the prior 2 quarters. So that's playing through. And that really is on the implementation of their deals as well. So all those factors are playing through the NDR in the quarter.

Operator, Operator

Our next question is from Tyler Radke with Citi.

Tyler Radke, Analyst

Githesh, I wanted to revisit your comments about reinvesting in certain business areas. I understand you've been gathering insights alongside your newly appointed President, and it seems like customers are looking for more comprehensive solutions to their challenges. I assume addressing this involves investing in the right talent on the go-to-market side. I have a few questions: How are you considering changes on the product front? Is this mainly a messaging and positioning issue from the go-to-market team, or do you need to implement product-level changes to address these issues more effectively? Also, Brian, as you evaluate those investments, how do you balance that with your strategy for expanding margins? Do you believe it's feasible to absorb these costs by reducing expenses in other areas? How do you approach this margin aspect as we look toward next year?

Githesh Ramamurthy, Chairman and CEO

Tyler, I'll start by addressing the second part of your question first, and then Brian will address the third. I will conclude with the first part of your question. To begin, let's discuss product. We've noticed that the solutions we are developing and deploying are showing significant differentiation for our customers. Since we entered the market with our AI in November 2021, we are now nearing four years in after seven years of development, and customers utilizing these solutions are experiencing improved results and better operating performance compared to those who are not. These positive outcomes validate that our core solutions are effective. Additionally, we recognize the need to expand the ecosystem of IX Cloud, which involves integrating three key elements: the comprehensive workflows we engage in, effectively delivering information to the right person at the right time for the appropriate claim and customer, and the incorporation of AI into all aspects of our operations. This will necessitate ongoing development. Looking back five or ten years, this evolution is simply a natural progression. We are also separating the Chief Product Officer role from the Chief Technology Officer role to allow more focus on these areas, which we believe will be beneficial based on client feedback. Regarding your first question about go-to-market strategies, what we are hearing from our customers is a strong request for us to enhance our offerings and collaborate on a broader scale across their organizations, which is both gratifying and exciting. Consequently, we are making investments to strengthen that side of the business.

Brian Herb, CFO

Yes, absolutely. Tyler, so the way to think about these changes that we're doing in go-to-market, think about them as strategically and operationally important, but they're not financially material. We are reallocating resources to higher ROI opportunities. And there are some onetime costs associated with the actions that I referenced. We're absorbing those costs into our Q4 position. So our guide didn't change for the year. But think about this reinvestment, it's not focused on cost reductions, but there are efficiencies which will offset some of the investments that we're making. So when you think about coming out of Q4 and into next year, we are expected to deliver margin expansion next year, consistent with the margin progression that we talk about in our guidance framework. And so that's how you should think about the impact as we roll out of this year into next year and how it will play through the margins.

Tyler Radke, Analyst

Okay. And apologies for the three-part question. So I'll keep it to one follow-up here.

Githesh Ramamurthy, Chairman and CEO

No problem whatsoever.

Tyler Radke, Analyst

So Liberty Mutual, exciting announcement there. Just remind us like where are you at with other top 20 carriers? And do you think that kind of creates a referenceability halo effect? And apologies if that was two questions, but just related to that big customer.

Githesh Ramamurthy, Chairman and CEO

Yes. Generally, we do not comment on specific customers or deals, but this is an exception for us. When considering the Liberty Mutual decision, references played a significant role. This definitely benefits us. They've been an excellent partner, like many others we have. The key point is that we focus on high-quality, high-caliber implementations. This also serves as a validation of the substantial investments we've made in casualty, which is importantly being acknowledged by our customers.

Operator, Operator

Thank you. I'm showing no further questions at this time. So I would like to turn it back to Githesh Ramamurthy for final remarks.

Githesh Ramamurthy, Chairman and CEO

Thank you all for joining us today. And on behalf of the entire CCC team, I want to express our sincere appreciation for your continued investment, interest and support. We're also pleased with the third quarter performance and remain confident in our ability to deliver on our strategic and financial objectives. And as we look ahead, we remain focused on scaling innovation, deepening client partnerships and delivering differentiated value across the economy. But most importantly, we're proud to help people get back on track when the unexpected happens, helping life move forward. I'd like to take a moment to thank our customers for their trust, our team members for their dedication and our shareholders for their continued support. We're excited about the opportunities ahead and look forward to updating you on our next quarterly call. Thanks, everybody.

Operator, Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Githesh Ramamurthy, Chairman and CEO

Thank you.